Marijuana Stocks Shunned by US Institutional Investors — For Now

Marijuana Stocks Shunned by US Institutional Investors — For Now

With all the revenue flowing in support of the burgeoning cannabis market, one would think that US stockbrokers and big-time investors are diving directly in.

But a cannabis gold rush where brokerage firms are busily fulfilling orders for marijuana stocks isn’t a fact — not in the US, anyway.

“It’s actually a tale of two markets,” said Hadley Ford, CEO and director of New York-based iAnthus Capital, which through its wholly-owned subsidiary provides investors diversified exposure to licensed cannabis cultivators, processors and dispensaries throughout the US. “There’s Canada and the US, and Canada is likely two to three years before the US market. ”

Ford is a healthcare and technology veteran that has been a working executive, entrepreneur and an investment banker, including stints with First Boston, Bank of America and Goldman Sachs.

He’s on board with bringing more funds into the cannabis industry.

In Canada, where medical cannabis is legal nationally, and recreational usage is on the cusp of legalization under the impending Cannabis Act, there’s no lack of interest from the investment community.

Switch to the US, where it’s legal in a couple of nations, and the idea of additional legalization is gaining more support in many more, but it’s illegal at the federal level.

A number of pink sheet, or over-the-counter stocks, are traded in the US. But very few domestic research analysts follow these stocks, and they’re shunned by big investors.

“Right now I’d say 99 percent of the institutional money from the United States wouldn’t invest in cannabis,” Ford said.

In actuality, some investment firms actively discourage financial managers from buying cannabis stocks for clients, or even giving research or advice on these stocks.

“I can’t recommend that you get it,” said an investment adviser from a top-5 US brokerage firm, who asked for anonymity of their private and their company’s name.

While customers can approach adviser from their company and inquire about buying cannabis-related stocks, they must label the purchase from the company’s system as “unsolicited” — meaning the investor approached the company together with the specific purchase request, but the company is blocked from from providing any accompanying research on the stocks.

Yet, the investment adviser says customers have requested to purchase cannabis stocks.

When asked how many customers have expressed interest in cannabis investments, the advisor replied, “Tons, tons, tons. ”

“A lot of customers are asking melsquo;How can we invest in cannabis? ’” the adviser.

Therein lies the chance for investors that can put money into these stocks, which often have a very low share price and a high upsidedown, before the US federal government legalizes recreational use of cannabis, a step that Ford and others view as inevitable.

“I think it’s a once-ever chance to take part in this shift from a black market to a white market,” Ford said.

Enough research is emerging for investors to invest in cannabis stocks. Motley Fool, a widely read financial site, this week recorded four promising NASDAQ traded stocks that are “swimming in money. ” Of course, all are Canadian.

The approximate cash balances, in US dollars, for the best projected cannabis manufacturers in Canada are:

Ford contrasts the upside to investing in cannabis with investing in other sectors. When investing in engineering, for example, investors must remember that firms have to develop a market around a product or a service amid a sea of other comparable services and products.

We’re pretty damned sure people are going to purchase cannabis,” Ford said. “It’s about implementation. ”

Its share price typically hovers around 4.50 Canadian dollars, or $3.52 US dollars, per share at the close of trading on the CSE, meaning modest investors could buy numerous stocks — regardless of whether they’re in the US or Canada.

“The average investor can go on their Fidelity accounts, point, click and get a share of our inventory,” Ford said.

The anonymous adviser thinks there’s a mounting tide of well-equipped equity waiting to jump into the market one cannabis is legalized by the US federal government.

“They’re looking to get to cannabis too,” the adviser said.

Ford also views the present lack of institutional money and backing in the US as the calm before a bountiful storm.

“There’s just one way that cannabis stocks can go, and it’s going to move up,” he said. “Right now there is a paucity of investors in the sector, and that will change. ”

Published at Fri, 11 May 2018 01:00:46 +0000

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